Hang Seng Index: Alibaba Slides, China Retail Slows, Moody’s Cut Hits Risk Appetite

Wall Street Advances Ahead of Moody’s Downgrade

Wall Street‘s rally defied looming credit concerns as Moody’s prepared to slash the US rating. The Nasdaq Composite Index gained 0.52% on Friday, May 16, while the Dow and S&P 500 advanced 0.78% and 0.70%, respectively.

The upswing came ahead of Moody’s downgrade of the US rating from Aaa to Aa1. Weaker-than-expected US economic data raised hopes for a 2025 Fed rate cut, contributing to the session gains.

Consumer Sentiment Weakens, Inflation Fears Grow

US data raised recession fears on May 16. The Michigan Consumer Sentiment Index fell from 52.2 in April to 50.8 in May. Weaker sentiment could signal a pullback in consumer spending, potentially impacting the US economy since it contributes over 60% to GDP. Meanwhile, the Inflation Expectations Index jumped from 6.5% to 7.3% in May.

The combination of weakening sentiment and higher inflation expectations signaled potential stagflation, a key Fed concern.

While Wall Street ended higher on Friday, the Moody’s downgrade weighed on Asian markets on Monday, May 19.

China Data Sparks Mixed Market Response

Economic data from China sent mixed signals on Monday, May 19. Although unemployment declined, sharply slower retail sales in April suggested the US-China trade war dampened sentiment. Meanwhile, industrial production increased 6.1% year-on-year in April, down from 7.7% in March, but higher than the expected 5.5% rise.

While retail sales trends may raise concerns about Beijing’s goal to transition to a consumption-driven economy, a tighter labor market suggests the stimulus measures have gained further traction.

Hang Seng Falls Despite Property Sector Gains

Asian equity markets had a choppy morning session on Monday, May 19. The Hang Seng Index dropped 0.46%, tracking US futures lower in response to the Moody’s downgrade. China’s economic data reduced the losses as investors eye US-China trade developments.

• The Hang Seng Mainland Properties Index rose 0.20% on better-than-expected housing sector data.
• Meanwhile, the Hang Seng Tech Index fell 1.13%.
• Tech giant Alibaba (9988) slid 3.81%, extending Friday’s losses after missing earnings estimates. Baidu (9888) declined 1.92%.

Mainland China’s equity markets also edged lower, with the CSI 300 and Shanghai Composite down 0.53% and 0.23%, respectively.

Brian Tycancgo, editor at Stansberry Research, commented on the risk off sentiment, stating:

“Gold pops 2% on MoodyBlues US credit downgrade. How at 3250 again.”

Nikkei 225 Drops as Yen Strengthens

Japan’s Nikkei 225 declined 0.31% on Monday morning, as the USD/JPY pair continued to trend lower from the May 12 high of 148.647. A stronger Yen could weigh on Japan’s export competitiveness and adversely affect corporate earnings.

Tech stocks led the losses, with Softbank Group (9984) and Tokyo Electron (8035) sliding 1.22% and 1.73%, respectively.

ASX 200 Tracks US Sentiment, Miners Weigh

Australia’s ASX 200 tracked the broader market trend, poised to snap an eight-day winning streak. The ASX 200 declined 0.24% on Monday morning, weighed by mining stock losses.

BHP Group Ltd. and Rio Tinto Ltd. fell 1.99% and 1.38%, respectively, tracing iron ore spot prices.

Meanwhile, Commonwealth Bank of Australia advanced 0.9% and Northern Star Resources rallied 1.35% on rising gold prices, limiting the morning losses.

Outlook: Watching Trade and Beijing Stimulus

Markets remain sensitive to developments in US-China trade talks. Breakthroughs could boost risk appetite and ease safe-haven demand, while renewed tensions may spark fresh volatility.

Investors should also monitor any new stimulus from Beijing. Fresh measures could support consumption and bolster Hong Kong and Mainland-listed equities.

Stay tuned for real-time updates on trade negotiations and policy shifts. Follow our live coverage here for updates on US-China trade talks.